The owner of the three-bedroom condo #22A at the Four Seasons Residences in San Francisco purchased the adjoining 836 square foot one-bedroom in October of 2008 and would like to merge the two units to create a 3,743 square foot four-bedroom home.

As the proposed merger will result in the loss of a legal dwelling unit, it needs to be approved by Planning. And in order to be approved without a formal hearing, the least expensive of the units to be merged would need to be deemed “demonstrably unaffordable or financially inaccessible housing.”

While the one-bedroom recently appraised for $1,350,000, believe it or not, that’s no longer considered to be demonstrably unaffordable or financially inaccessible housing in San Francisco. And as such, a formal hearing for the proposed merger will be held this week, a merger that the Planning Department recommends be denied.

Set at 80 percent of the combined land and structure values of single-family homes in San Francisco, the threshold for “demonstrably unaffordable and financially inaccessible housing” in the city is now $1,506,000, up from $1,342,000 nine months ago.

why does the city have to stick its nose in everything like this? it doesn’t PREVENT anything it just slows everything down for everyone else. if someone wants a bigger condo, they’re going to get a bigger condo. whether you use taxpayer money and planning dept time to review this won’t change anything. just another layer of bureaucracy in sf’s abysmally slow planning and approval process. the planning dept should be looking at bigger things that matter.

This is nothing new. Is San Francisco the only substantial city in the western world which opposes “dwelling unit mergers”?
And the idea that $1,350,000 is affordable is truly preposterous. Not even in London or New York.
The owner is just going to knock down a wall, no matter what they say, and turn the second kitchen into a “wet bar.”
Is there anything the city can do to stop them? How would they punish them?

It is a Mandatory DR hearing because it is a merger of units. There are two other kinds of Mandatory DRs: Demolitions and marijuana shops. Merger of units and demos kick in the affordability issue. It is the law.
And unfortunately no one should be surprised at what is considered affordable or even “relatively affordable” when homes are going for what they are going for. But it is an amazing number. It is interesting though because they have approved other merger of units recently, where they were not condos, but flats in two or three unit buildings or even two adjacent single family homes. I guess this just shows that condos are not appreciating as fast as “free-standing” buildings.
[Editor’s Note: It’s the “affordable” price point which triggers the mandatory versus administrative review. And this doesn’t speak to the relative appreciation of condos versus “free-standing” buildings, but rather to the fact that a measure of single-family homes is being applied to a one-bedroom condo.]

Just because it is in the law does not make it right, intelligent, reasonable or prudent. We have had a seriously dysfunctional, often irrational, left leaning Board of Supervisors for several decades.
The only thing that has saved this City is that the mayor is elected citywide. With the exception of Agnos, we have had center-left mayors starting with Feinstein.
While the Planning Commission is slightly better in recent years, it is still not good enough.

At some point, I don’t understand what this accomplishes–it will not really prevent anyone from using both units as their primary residence. This person owns both units, they are not going to rent out the other unit, nor sell the other unit. Likely, they will just do an illegal conversion, even if it is just cutting a small door between the two units or just using the two existing front doors. And, it goes without saying that a $1.5 million unit is not affordable to anyone, but the wealthy. Moreover, by limiting conversions at the high end, it simply drives up prices for anyone wanting/needing a larger unit, even for working class families that really need the extra space. So, how does this preserve “affordable” housing for anyone?
I understand what the law requires and the intent behind it, but the application of it is ludicrous. It is time to amend the law and limit its application to only truly affordable housing.

I often read about how larger units in NYC are the most desireable, e.g., a classic 6 with 3 bedrooms. I wonder if there will come a time when such units command a premium here in SF? I certainly see many more families staying put in my neighborhood over the last 5+ years, rather than fleeing to the ‘burbs.

Larger is not always better everywhere, although it clearly is now in San Francisco. The Supervisors and Planners here really do not care about families or people who want (but are not “entitled to”) larger spaces. It is political: they believe that their policies will be supported by poorer people and people who are willing to live in small spaces.
Until very recently, per square foot (actually meter square) prices in Paris were lower for very large apartments than smaller ones. I think they have caught up now.

@conifer: Agreed re Paris. Similar situation to what I have seen in NYC.
Still, here in SF it is pretty common to see a large flat trade at a lower ppsf than a comparable quaility studio or 1bd.
Will this trend reverse here too?

If you have lots of people looking for places, and they all have roughly equal amounts of money, you’ll get the highest return from having more, smaller apartments so that you can get something from everyone. If you have a single person who has so much money that everyone else is irrelevant, the highest return comes from catering exclusively to that one person.
If larger spaces are commanding higher prices, that’s an indication that we’re moving more toward the latter.

@lol, as a lawyer having practiced at a big firm in SF for a decade and counting, there’s no way I can truly afford $1.5M or even $1.3M. I could stretch for $1M, but that would be over my comfort level. It’s crazy that even the lower upper class needs rent control.

Chris:
I will try logic in a case that has no logic. I think the board of supervisors want to maintain dwelling units (I just love that phrase) and are using a “bright line” test to preserve. If they allow an exception to one party (such as these people in the four seasons) they might be required to provide similar exceptions to others. And so goes the splippery slope.
Do I think it is fair? No. But the next step of the logic goes – the owner sells, someone moves into a 836 square foot unit, which (and here is the leap of faith) means that someone else can move into the buyer’s former “dwelling unit.” And the landlord of that buyer’s former unit gets to “jack the rent” on their new tenant. Who wins in all this – the landlord.
More twisted. One year later, the tenant, realizing that he/she can’t cover the rent, signs onto Airbnb. The landlord, files a notice eviction, tenant is booted and landlord is able to bumpt the rent again.
There is a theme throughout all of this. In San Francisco, the landlord wins in the long-run.

We sucessfully merged two 450 SF studio apartments in 2010. We now have a 925 SF 2-bedroom apartment. Our merger was handled administratively because we could answer 4 out of 5 questions on the merger form.
Two of questions were answered because our overall building was overbuilt based on today’s planning and zoning codes. The other 2 questions were whether the units were owner occupied. We had held both units owner occupied for 5 years before submitting for the merger. It was a drain on our wallets but needed to prove the 2nd unit was off the market. We lived between the units: one being our living/kitchen and the other our bedroom and closet. Our merger was vertical so we couldn’t simply one a wall between the units. We used a common stair to move between the units.
We went into the merger with our eyes openned wide to the situation knowing that we needed the merger to be approved administratively. We knew there was too much to risk with a Planning commission hearing. We did not have an affordability test for the units. Is this a new restriction for mergers?

@ Q: Just to be clear, I am reading that you cannot afford 1.5 m. maybe 1m. Ok, I get that.
But that does NOT mean you cannot afford to buy a residence in San Francisco. You just can’t (or choose not) to buy one in that price range. I get that.
But there are lots of properties in SF that are in the 500k-750k range in decent and upcoming neighborhoods.
Just because one cannot afford $1.5 m for a property, does not, in itself, make San Francisco “unaffordable”. That’s a clever play on semantics.
And the last thing, your economic group needs is rent control.

not to mention Q basically inferred that if he can’t afford $1.5M then he needed rent control.
rent control should be for those making below the median (<$70K for a household). everyone else is just abusing the system

Futurist, Spencer,
When you are saying Q’s economic group is rent control, that’s provided he can first find a time machine to jump back to a time where he can lock a low rent.
Q, as futurist said, you have to adjust your ambitions to your means. Yes, you are a lawyer, but No, the world is not all yours. There are places where lawyers are at the top of the heap (I am in LV now and it feels that way there) and there are places where the rest of the world’s natural laws don’t apply.
Where were you in 2010 if I may ask? Now 2009-2011 was a very accessible market. If I had to redo a purchase today, I would have to seriously reduce my ambitions. Timing WAS everything. Now the crazies with money are ruling the asylum.

Same reaction as fishchum. Recently every post of Futurist’s is this same thing: rewrite the post to which he is responding to say “I can’t afford to live in SF but I am entitled to do so,” then attack that straw man.
And Spencer: the word you want is “implied,” not “inferred.”

@ Q: Just because you can’t afford a place in the $1.3M+ range does not mean the city needs rent control. Talk about an entitlement mentality; that’s exactly what’s wrong with the country. I will say it over and over again: If you can’t afford to live in SF or any specific city, live SOMEWHERE ELSE where you can afford it. The city/world does not revolve around you and your needs.“In San Francisco, the landlord wins in the long-run.” Oh, puh-lease. When one owns real property, I say the owner is ENTITLED to do whatever the hell s/he wants to do with it, even renting it at exorbitant rates, whatever the market will bear. Being a landlord is a business. Last time I checked, unless it’s a legitimate noprofit, businesses are in it to MAKE MONEY. Huh. Bizarreconcept, right?

And yes, Fishchum, where exactly did anyone say that Q could not afford SF? You need to read a little more carefully.
Fact is, Q has stirred up some s**t by whining about his inability to afford 1.5m or thereabouts. Pity it would hurt his “comfort level” to stretch to $1m.
Cry me a big wet river.
But I’m overjoyed at what Pfffttt said, which I have said repeatedly and continue to say:
If ya can’t afford to live here, then move where you can afford.
It’s a tough world out there.

My economic equation is vastly skewed by rent control (my rent is approx. 1/3 fair market, after only 5 years renting). If I were evicted, I would seriously consider buying, as fair market values for renting and buying are roughly comparable for my preferred size in my preferred neighborhoods. Either way, though, it would be a significant stretch on my budget. Leaving SF would also be a serious consideration.
I make good money, though we are a single-income family. I look at sticker prices of both renting and buying in the city with trepidation. I have no idea how there are enough people with sufficient wealth/income to support SF’s housing prices. Perhaps people are just willing to stretch far more than I am.

“Is there anything the city can do to stop them? How would they punish them?”
I gotta say, IMHO these people are suckers for asking rather than simply doing it on their own. Before we bought our place a few years ago, we looked at (and bid on) a ton of places that had a second unit or in-law that had been merged to create a SFR. Unwarranted, and disclosed, and it had zero impact on the selling price. We ended up buying a plain ol’ SFR that had never had a second unit, but it wouldn’t have bothered me at all to buy a place like that. There is zero enforcement of this. And in the one in a million chance you get busted, just build a quick cheap wall.
I’m no anarchist, but dumb laws will get ignored. And rightly so.

Q, thanks for sharing.
My advice: keep your rent controlled unit as long as you can.
Can I ask you whether your single-income family was a choice, and if this choice was helped by your low rent?
If that is the case and if your significant other can get similar income as you, then my choice would be to have him/her go back to work!
This might sound a bit odd, but let me give you my reasons:
– The way things are set up, you are at the whim of a landlord’s change of mind or change in situation. If your landlord is old, the heirs will probably not keep a low paying tenant. I wouldn’t!
– You cannot complain about not being able to afford what you want in SF and then making a financially damaging decision such as a single-ncome family. You’re competing with 2-income overachievers, why set yourself up for failure if you’re really committed to buy?
Last question: how can this market be supported at this level?
It’s a mixed issue.
On the supply side, less than 40% of units are owner-occupied. In this bunch, many are owned long term by people who paid way less than current price. Prop 13 locked their property tax rate at the purchase price + minimal appreciation. 2 neighbors can have wildly different property tax bills, similar to what you see with rent control. Old timers are staying put and will give their prop 13 entitlement to their heirs. This is seriously constraining supply.
On the demand side, yes tech is big, and probably the biggest factor driving the market in many areas. It’s not always big new money buying. I came to CA in 1997 and have been through 3 dot-coms/start-ups. All the transplants I knew in the BA in the late 90s are still there. They’ve grown with the industry and layer after layer of success has cumulated to making everyone in this bunch pretty OK. All are able to afford a SFH everywhere from 1M to 10M. Some all cash, some 50+% down.
Low supply, high demand. It’s a good time to have something for sale today, but not a good time if you can’t compare with the crazy money of the tech crowd.

being a lawyer with 10 yrs experience does not put you in the upper crust in this town. Maybe in a small town, lawyers and doctors are tops. but not in a city, where they are more middle of the road middle class.assuming you went to law school right away and started practicing right away, your probably mid 30s. Why do you need a $1.5M unit anyway, especially as a single earner?
There are a ton of people in this city making over $400K/yr and if you make less or dont have a nice nest egg, then you are not going to get a high quality large place in a top neighborhood. limited supply and lots of rich demand.
the economy is booming. supply is low, and there are tons more IPO lockups coming this year. i see 2014 being just as a crazy as 2013. hard to guess beyond 14, but this year will be hot.

There are a ton of people in this city making over $400K/yr
This is false. $353,576 was 95th percentile for household income as of 2012 (see namelink). Assuming Q is truly at a big national (AmLaw 100) firm and is not a partner, he makes over $300,000/year.
But the point is that there do not need to be a ton of people making over $400k a year to support these prices.
First, as lol points out, there is very little turn over per year. Just pulling up sales at above $1.25M for the past 12 months on Redfin, there were fewer than 2000.
Second, there are enough people who make less than $400k/year and make less than Q *but* have one-time or multiple-time IPO or buyout payouts to control the market.

And then there are just the plain ol’ hard-working people, with a goal, who were diligent at saving and are able to drop 50+% for a down payment. Just sayin’ . . .
So those who whine about not being able to afford anything decent in SF . . . just stop it. Having a single income, thus rendering one to be unable to afford world-class city living, is a personal/family CHOICE. Perhaps you should evaluate your priorities in life.

“And yes, Fishchum, where exactly did anyone say that Q could not afford SF? You need to read a little more carefully.
Fact is, Q has stirred up some s**t by whining about his inability to afford 1.5m or thereabouts. Pity it would hurt his “comfort level” to stretch to $1m.
Cry me a big wet river.”
– I’m still waiting for the part where Q was complaining about not being able to buy in SF, Futurist. You’ve been using this site as some sort of crusade to make sure the rest of know that the Excelsior and Portola are still affordable. I don’t disagree with you, but you really seem to have a chip on your shoulder about this.

@lol, not a single-income family by choice. Disability sidelined my spouse.
I’m not complaining about not being able to buy. I’m content with my apartment and buying just doesn’t make rational sense for my situation. I think the fact that a family with our income can’t comfortably buy indicates something broken with the economic system of this region.
On a side note, I actually own residential investment property in parts of the country. My approach to buying a home in which to live is influenced by the unemotional analysis I use when choosing to an investment property.
@Pfffttt, I imagine that the number “plain ol’ hard-working people” in this city who can save $750,000 on top of a reasonable retirement fund is vastly smaller than the number of people making $500K/year.

I must amend my earlier comment since the Planning Commission made a common sense decision, and approved the merger. While Bill Sugaya feinted left toward Kathrin Moore, he voted with the majority, leaving her alone to vote no.
One might also infer from the comments of the Department that they realized that it was silly to call this $1.5m condo affordable.
Am I just dreaming that reasonable government may be coming to San Francisco? Probably, but wouldn’t it be great?